The Securities and Exchange Commission’s Division of Corporation Finance has issued new crypto guidance after the CLARITY Act failed in the US Senate. The FAQs address when tokens fall outside securities regulation, focusing on Staking Receipt Tokens, buybacks, and marketing. A staking receipt tied to a digital commodity not subject to an investment contract can be considered a digital tool if it does not transfer control to the issuer. The SEC said maintaining a functional blockchain network does not constitute essential managerial efforts under Howey, and buybacks of non-security tokens for functional systems do not create investment contracts.
The Securities and Exchange Commission’s Division of Corporation Finance has published a new set of crypto FAQs following the failure of the CLARITY Act in the US Senate on September 15.
The guidance addresses long-running questions about when tokens may fall outside securities regulation and what types of issuer activity create Howey-related concerns.
One notable section addresses Staking Receipt Tokens, which represent ownership of crypto assets deposited for staking. The circumstances indicate that a staking receipt tied to a digital commodity not subject to an investment contract can be considered a digital tool since it simply evidences ownership of the underlying asset.
In certain cases, such a token may qualify as a digital commodity when issued by a protocol-based liquid staking provider. The distinction depends on what rights the receipt creates.
The agency said a true receipt should not transfer ownership or control of the deposited asset to the issuer. It should not allow the issuer to lend, pledge, rehypothecate, or otherwise use it.
According to the statement, continuing to secure, maintain, improve, or enhance a functional blockchain network does not constitute the type of essential managerial efforts associated with an investment contract under Howey. Once a functional crypto system has no central controlling party, statements by an original issuer would generally be less likely to create a new investment contract.
Announcing a buyback of a non-security token for a functional crypto system would not amount to a promise of essential managerial efforts. The answer changes if the network is not yet functional and the issuer markets the buyback as a mechanism designed to generate yield or returns.
Broader marketing receives similar treatment. The SEC said simply promoting a network’s existing utility or capabilities would generally not be enough to establish an investment contract.
Even aspirational statements about future features may fall outside that threshold if they do not promote the prospect of profit. These FAQs follow recent guidance issued by the SEC and the CFTC after the CLARITY Act vote failed.
